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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : : : v. : : SERVO SYSTEMS, USA, INC., and : EDWARD G. BOUNDS, JR., : Defendants : : : : EMBREX, INC., : Plaintiff : : v. : : SERVO SYSTEMS, USA, INC., and : EDWARD G. BOUNDS, JR., : Defendants : ...o0o... EMBREX, INC., Plaintiff

CIVIL NO. AMD 05-1961

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CIVIL NO. AMD 05-2629

MEMORANDUM and ORDER The plaintiff in these two cases, Embrex, Inc., is a judgment creditor of defendant Edward G. Bounds, Jr., in consequence of certain patent/breach of contract litigation in the United States District Court for the Eastern District of North Carolina. Upon the appeal by Bounds from adverse judgments on jury verdicts and trial court rulings against him to the United States Court of Appeals for the Federal Circuit, the judgments entered by the district court were affirmed in part and vacated in part and the case was remanded. See Embrex, Inc. v. Serv. Eng'g Corp., 216 F.3d 1343 (Fed.Cir.2000). In particular, the Federal Circuit vacated an award of compensatory damages in favor of Embrex but otherwise affirmed the judgments under review, and specifically, the money judgments in favor of Embrex for

attorney's fees and costs. Id. at 1352 ("This court vacates the award of infringement damages, and remands for determination of a reasonable royalty, but affirms the findings of willfulness and the award of attorney fees."). Rather than return to the trial court to litigate the "determination of a reasonable royalty," id., as directed by the appellate court, Embrex abandoned all trial court proceedings and instead undertook to execute on the undisturbed awards for attorney's fees and costs. In due course, Embrex recorded the judgments in various jurisdictions, and in particular in the Circuit Court for Wicomico County, Maryland, sometime in 2004 ( and, as described below, in 2005, in this court). Embrex then instituted garnishment proceedings in the circuit court (hereafter, "the state court action") with defendant Servo Systems, USA, Inc., as garnishee. The state court action is on-going, at least to the extent that, recently, Embrex has moved to dismiss the state court action, seeking, instead, to proceed in this court. In the meantime, Embrex instituted these two cases. Case no. AMD 05-1961, filed on July 19, 2005, is a declaratory judgment action in which Embrex seeks the following relief: (1) an order declaring that certain commissions or royalties payable now and in the future by Servo Systems to Bounds do not constitute exempt wages under Maryland law; (2) an injunction prohibiting Servo Systems from refusing and failing to pay over any funds in accordance with any writs of garnishment or execution that might be issued in any action; and (3) an accounting. Bounds and Servo Systems each filed motions to dismiss the

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declaratory judgment action, asserting, inter alia, that the North Carolina judgments which are the bases for the state court action were non-final and therefore not subject to execution. I referred the resolution of the motions to dismiss to the Honorable Paul W. Grimm, United States Magistrate Judge, for a report and recommendation. On June 22, 2005, prior to its filing of the declaratory judgment action, Embrex had registered the North Carolina judgments in this court in case no. AMD 05-2629* and sought and obtained writs of garnishment and execution (on August 8, 2005) against certain intangible property held by Servo Systems for the benefit of Bounds. Now pending in that case are motions to quash filed by Bounds and Servo Systems. The motions to quash were likewise referred to Judge Grimm for hearing and determination, and issuance of a report and recommendation. After full briefing and an oral hearing, Judge Grimm made findings of fact and conclusions of law and announced on the record his report and recommendation, followed by a written order. Judge Grimm recommended that I find and conclude: (1) that the North Carolina judgments are final judgments subject to execution in the normal course; and (2) that these actions be stayed pending the resolution of the state court action. In short, Judge

As noted in text, Embrex filed case no. AMD 05-2629 (the garnishment action) nearly a month before it filed case no. AMD 05-1961 (the declaratory judgment action). Counsel failed to alert the clerk to the relationship between the cases on the civil cover sheet, however, and thereby caused a delay in the proper docketing and assignment of the registration/garnishment case as a related contested matter that should have been assigned to the same district judge. Consequently, the first-filed case was not opened as a civil action and regularly assigned until September 22, 2005. -3-

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Grimm concluded that: (1) the plain language of the Federal Circuit opinion and mandate made clear that the undisturbed judgments for costs and attorney's fees in the North Carolina action are "final judgments" subject to execution; and (2) the state court action is an action in rem in respect to any and all property in the hands of Servo Systems held for the benefit of Bounds, and that therefore this court should decline to exercise jurisdiction over the same property so long as the state court action was proceeding. Now before the court are the objections filed by Bounds and Servo Systems to the report and recommendation of Judge Grimm. The objections have been fully briefed by the parties and no hearing is needed. Judge Quarles recently summarized the standard of review applicable in cases such as this one: When objections are made to a magistrate's recommendations on dispositive matters, the reviewing ""judge shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made."" 28 U.S.C.

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Maryland Law